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Governor Halts Georgia Gas Tax Increase With Executive Order

Kentucky and Connecticut also face tax hikes on gasoline and diesel.

June 26, 2011, 08:00 pm

JERSEY CITY, N.J. – Georgia Gov. Nathan Deal signed an executive order halting the 1.6-cent increase in the state's gasoline tax that would have gone into effect on July 1, according to a Times-Herald report.

Because the price of gasoline fluctuates frequently and varies at different gas stations, Georgia sets its four-percent sales tax on fuel twice a year, in January and July, based on the average price of unleaded gas. However, if the average price of gas changes 25 percent or more and stays at that price for more than three weeks, it triggers an interim recalculation.

An interim recalculation was triggered on May 1, and the sales tax rose from $0.101 to $0.129, based on an average price of $3.23 per gallon. The tax that would have gone into effect in July was $0.145, based on an average price of $3.64 per gallon.

"With trendlines showing prices coming down, I think the tax rate that took effect May 1 should stay in place," Deal said when he signed the executive order last week. "Over the next few months, I think gas prices will continue to come down, and the May 1 rate will better reflect gas prices throughout Georgia. With this executive order, we're making sure that Georgia's families and businesses will keep an additional $40 million in their pockets over the coming months."

Deal's office estimated that the order could save Georgia drivers $40 million over the next six months.

Kentucky residents are about to face a similar tax increase. On July 1, the gasoline tax rate will rise 1.9 cents, from 25.9 cents per gallon to 27.8 cents per gallon, according to a Kentucky.com report. The change is due to a 1980 law that ties Kentucky's gasoline tax to the average wholesale price for gasoline.

The law was created under concerns that rising fuel prices would cause people to cut back on gas purchases, which would in turn mean less money for the state's Road Fund.

According to Greg Harkenrider, acting deputy executive director for the Governor's Office for Policy Research, the tax rate is based on the variable rate, supplemental rate and an underground-storage tax, and an April survey showed that the wholesale price of gasoline has gone up, causing the variable rate to rise as well.

State Transportation Cabinet spokesman Chuck Wolfe predicted that the increase could raise millions for the Road Fund. "Historically, the increase has yielded about $30 million per penny," Wolfe said. "So, on an annualized basis, an increase of 1.9 cents per gallon would yield about $57 million." However, it depends on how much gas drivers purchase. "When gas prices go up, people usually cut back," he added.

Kentucky holds a survey on gasoline's wholesale price every three months, according to the report. The next survey will take place in July, with any resulting changes taking effect in October.

Finally, Connecticut gasoline dealers are speaking out against a nearly 7-cent hike to the state’s diesel excise tax, according to CBS New York.

"We're now going to have the highest diesel tax in the northeastern United States -- 46.2 cents a gallon for every gallon sold,” said Gene Guilford, head of the Independent Connecticut Petroleum Association." "We cannot continue to rely on just the excise tax on gasoline and diesel fuel to pay for things. It makes no sense. It makes us uncompetitive."

Guilford predicted that truck drivers will fill up on diesel fuel before entering the state and after exiting, taking a toll on Connecticut's highways and bridges without contributing funds to maintain them.

Connecticut's diesel fuel tax hike is also slated to take effect July 1.